In South Bay, 99 percent of you are online tax cheats — best in the state

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A United Parcel Service driver delivers packages from Amazon.com in Palo Alto, Calif., Thursday, June 30, 0211. Amazon.com Inc. said Wednesday that it will stop working with online affiliates based in California since the state passed a new rule that forces online retailers to collect sales tax there. In an email Wednesday to California-based affiliates individuals or companies who run websites that refer visitors to Amazon and then get a cut of any resulting sales the Seattle-based company said it would cut ties with those who reside in the nation’s most populous state if the law became effective. Gov. Jerry Brown signed the law Wednesday as part of a larger state budget package. (AP Photo/Paul Sakuma)

Santa Clara County consumers, take heart: When it comes to reporting your taxes on online and other out-of-state purchases, you’re the most honest bunch in the state.

But don’t pat yourself on the back just yet: 99 percent of you still cheat on your taxes.

A new report released Friday from the state’s tax collectors found that just 0.42 percent of California residents actually reported their out-of-state purchases on their 2009 tax returns. The South Bay led the state at a whopping rate of 1.03 percent.

Carl Guardino, CEO of the Silicon Valley Leadership Group, attributes this partly to the South Bay’s wealth. Silicon Valley residents, he said, also are more aware of the rules surrounding online buys.

Online retailers such as Amazon.com and Overstock.com historically had not charged sales tax to California consumers. It’s been up to the honesty of the buyer to report the purchases when filing their annual state tax returns.

But nearly everyone ignores this law, saving the average person $170 per year while costing the state more than $2 billion at a time of severe budget cuts. Instead, the tax generated a paltry $10.4 million for the state.

“This is as surprising as the sun coming up or California having good weather,” Guardino said. “A voluntary system that few people know about that depends on consumers to take an extra step at tax time, earns these results, where more than 99 out of every 100 people either aren’t aware of it (or) don’t do it.”

The report from the State Board of Equalization shows the richer you are, the more likely you are to report the tax.

In Santa Clara County, an impressive 2.35 percent of tax filers who earned more than $100,000 reported the tax. That figure drops to 0.29 percent for those earning less than $30,000.

“The good news is, we can only go up from here,” Guardino said. “The bad news is, it’s obviously not a good system.”

The Legislature has passed a law trying to force online retailers to charge sales tax. But Amazon is gathering signatures to place a measure on the ballot that would repeal the law. The company’s local affiliates, meanwhile, have shut down as the retailer refuses to collect the tax.

In addition to statewide data, the report included scores for the state’s 10 largest counties. Alameda and Contra Costa counties came in second and third after Santa Clara with 0.76 percent and 0.63 percent of residents reporting the tax. San Bernardino and Riverside were the worst, at 0.19 percent.

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